Position Sizing: How Much Should You Risk Per Trade?

Ask a struggling trader what they're working on and you'll usually hear about entries: a better indicator, a cleaner setup, a smarter signal. Ask a surviving trader and you'll hear about something far less glamorous - how much they put on each trade. Position sizing is the one decision you fully control on every single trade, and it's the decision that determines whether a losing streak is an annoyance or the end of your account.

The question you're actually answering

Position sizing is not "how many coins can I afford to buy?" It's: if this trade hits my stop loss, how much of my account am I willing to lose? Those are completely different questions. The first one fills your account with hope; the second one fills it with arithmetic.

The widely used answer is the 1% rule: risk no more than about 1% of your account on any single trade. Some experienced traders go up to 2%; many go lower. The exact number matters less than the fact that it is fixed, small, and decided before the trade - not during it.

The formula, once and for all

Three inputs: your account size, your risk percentage, and your stop distance.

Position size = (account × risk %) ÷ distance to stop

Say you have a $5,000 account, you risk 1% ($50), and your entry is $100 with a stop at $95 - a $5 distance, or 5%. Your position is $50 ÷ 0.05 = $1,000. Ten percent of your account is in the trade, but only one percent is at risk.

Notice what this implies: a wider stop means a smaller position, a tighter stop allows a bigger one. The risk stays constant; the size adapts. Traders who use the same position size on every trade regardless of stop distance are unknowingly risking wildly different amounts each time.

Why small risk isn't cowardice - it's survival math

Losses compound against you asymmetrically. Lose 10% and you need 11% to get back. Lose 30% and you need 43%. Lose 50% and you need to double your money just to break even.

Now put that next to an ordinary losing streak. Even a strategy that wins 55% of the time will produce five consecutive losses fairly regularly. At 1% risk per trade, five straight losers cost you about 5% - uncomfortable, recoverable. At 5% risk, the same streak costs nearly a quarter of your account, and at 10% risk you're down 40% with a completely intact, statistically normal strategy. The strategy didn't fail. The sizing did.

The mistakes that undo the math

The formula is simple; sticking to it is not. The common failure patterns are worth naming. Sizing up after losses to "win it back" - that's revenge trading wearing a calculator as a disguise. Sizing up after a winning streak because you feel unstoppable - that's how one bad trade erases ten good ones. Moving the stop further away after entry without reducing the position - which silently multiplies your risk. And keeping several correlated positions open at "1% each" - five altcoin longs are not five independent bets; on a red day they behave like one 5% bet.

Make it a rule, not a mood

The honest problem with position sizing is that it's boring, and under stress boring rules are the first thing to go. That's the gap Indikora is built for: it tracks your actual risk per trade across your imported trades, flags when your sizing drifts from your own plan, and shows how your losing streaks interact with your drawdown - before the math becomes unforgiving. The simulator lets you test all of this with $10,000 of virtual money, where mistakes are free.

No tool and no formula can guarantee profits, and nothing in this article is a promise of returns. This is education, not financial advice. But if there is one habit that separates traders who are still here in three years from those who aren't, it's this one: decide your risk before the trade, size the position from the stop, and never negotiate with the number mid-trade.